Previously, we discovered mutations in the mu2 gene in Drosophila that allow the recovery of chromosome aberrations that have lost a natural telomere and regained a structure that protects the chromosome end. These neotelomeres have lost the DNA motifs normally associated with telomeres, but retain the proteins that protect the chromosome ends and distinguish them from chromosome breaks. The MU2 protein is distributed along chromosome arms in the absence of DNA damage, but upon radiation-induced damage to DNA redistributes to the radiation-induced repair foci. The protein is also found at sites of meiotic recombination, which are induced by DNA double strand breaks. MU2 is a homolog of MDC1;when present in repair foci, MU2 acts as a scaffold, with one end of the protein bound to a complex of the repair proteins MRE11, RAD50 and NBS and the other end bound to a phosphorylated form of variant histone H2Av known as gammaH2Av. (Drosophila H2Av is an ortholog of human H2AX.) Mutations in the mu2 gene cause a decrease in the number and size of radiation induced repair foci and meiotic recombination foci. The rate of DNA repair appears to be reduced, although repair is not blocked. Similarly, cell cycle regulation in response to DNA damage is decreased in these mutants, but not blocked entirely. In an attempt to understand the interaction of factors that control telomere stability and chromatin structure, we searched for chromatin proteins that interact with MU2. One of these is heterochromatin protein 1 (HP1a), which binds to MU2 in the absence of DNA damage. After radiation repair foci form in heterochromatin, which is HP1a rich, condensed chromatin, within a few seconds of treatment, then they are removed from heterochromatin to nuclear domains with more relaxed euchromatin. RNAi knockdown of HP1a prevents the removal of foci from heterochromatin, and increases G2/M arrest and apoptosis. These observations suggest that DNA repair requires a relaxed chromatin structure to proceed.